Cook inlet gas woes: meeting Southcentral Railbelt utility needs.

• Author: Bradner, Mike
• Position: OIL & GAS

A natural gas shortage in Southcentral Alaska this winter appears to have been averted, but longer-term problems in the regional gas supply picture remain. Hilcorp Energy LLC took control of Marathon Oil Co.'s Cook Inlet assets, mostly gas producing wells, on Jan. 31 as the sale of those assets was completed. Hilcorp had previously acquired Chevron Corp.'s Inlet properties, which included the producing offshore oil platforms.

Hilcorp immediately went to work to increase production on the Marathon producing wells and also called on regional utilities like Enstar Natural Gas Co. to discuss their needs. Enstar has been worried about its supply because the utility is still short of having its 2013 gas requirements under contract, a situation Enstar has not been in before, at least not to this degree.

Gas Supply Shortage

The utilities' gas supply shortage--Enstar's in the short term and all utilities, including electric utilities--for a mid-term, has surprised many Alaska state officials and community leaders in the region. Cook Inlet is thought to have good potential for new natural gas discoveries, and a generous set of state incentives has attracted new explorers. Also, new gas is being discovered.

The utilities believe, however, that not enough new gas is being discovered and that what is being found cannot be put into production fast enough to meet a projected shortfall. Imports of liquefied natural gas or compressed natural gas are being discussed, a notion that disturbs Gov. Sean Parnell. Parnell and other state officials, including Commissioner of Natural Resources Dan Sullivan, believe imports should be the last option.

They are convinced there is gas waiting to be found in Cook Inlet and that the explorers will find it. Meanwhile, they are concerned about utilities locking themselves into long-term supply contracts on imported LNG or compressed gas and also investing in regasification and other facilities that local consumers will pay for through the rate base in utility bills.

Meanwhile, Cook Inlet Natural Gas Storage Alaska, Southcentral Alaska's new gas storage facility on the Kenai Peninsula, has been a savior for Enstar this winter. It is the first year of operation for CINGSA, and Enstar has been able to store gas produced last summer, which helps the gas "deliverability" problem during winter peak demand periods. Enstar's parent company, owns CINGSA in a partnership with Warren Buffett's MidAmerican Energy Holdings Co.

Enstar's...